Hardwood Markets….where we’ve been and where we’re goin’
By Jeff Settle
It sure has been a rough 3 years on the folks in the hardwood industry. Doesn’t matter if you are a logger, sawmiller, or a secondary forest products industry (cabinets, furniture, etc), all those manufacturing segments have been and continue to go through some very rough times. Many of these companies have had to lay off several people; and in extreme cases, mills have had to shut down completely. The poor economy and its effect on the housing industry are most often looked at as the primary indicator for the hardwood industry. Between 2008 and 2011, the housing markets were terrible which had significant effects on the hardwood industry and markets. Now that we are in 2012, economists report that our economy is improving, things are getting better, we’ve turned the corner, etc. Depending on who you talk to, you’ll probably get several different takes if indeed the economy is improving.
The Hardwood Leader recently reported that although lumber prices are still declining the industry is much closer to the bottom than it was 30 days ago. The same article stated that, by most accounts, the housing market has bottomed out as well. That being said, there will be several hurdles to overcome before the housing market fully recovers. Inflation, job markets, higher mortgage rates, foreclosure sales and tight credit will hinder recovery but growth should be expected. As the housing market begins its recovery look for furniture, cabinet, stair and millwork demand to increase but probably not until later in 2012 or possibly 2013.
Let’s take a look at lumber pricing in our region. The pricing we’ll use comes from the Hardwood Review Weekly and prices are for 4/4 green lumber across all grades. We’ll look at pricing across all grades and species as well as individual species from 2007 to present.
Lumber prices across all grades and species for 4/4 lumber averaged $699 per thousand board feet (Mbf) or almost 70 cents a board foot during the 4th quarter of 2007. That price dropped to $603MbF during the same time in 2008. The price decreased again in 2009 to $545Mbf. In 2010, however, the prices began to recover to $624Mbf but were still 11% lower from 2007 prices. In the most recent Hardwood Review Weekly (dated 12/30/2011), the average price for 4/4 green lumber (all species) was $631Mbf, a very slight increase from the 2010 level but almost 14% higher than the same period of time in 2009. While growth is modest, any growth or price increase is better than none at all.
The average price of 4/4 green Red Oak (across all grades) during the 4th quarter of 2007 was $588Mbf. The price dropped significantly during the 4th quarter of 2008 ($526Mbf) but came up slightly in 2009 ($544Mbf). In 2010, the price jumped to $649Mbf, a 19% increase. Current pricing has dropped significantly again to $531Mbf, an 18% decrease from 2010. On the bright side though, many predict that Red Oak has bottomed out and we should see potential price increases later in 2012.
White Oak’s average price during the 4th quarter of 2007 was $747Mbf. White Oak dropped 15% to $634 during the same period of 2008. The bottom fell out in 2009 as the price dropped to $515Mbf (19% decrease) but then rebounded with a 30% increase to $668Mbf in 2010. Current White Oak pricing is just slightly lower than that of 2010 with an average price of $597Mbf.
Tulip Poplar pricing has been up and down since the end of 2007. Poplar’s average price during the 4th quarter of 2007 was $436Mbf. The price dropped slightly in 2008 to $423 Mbf and then rose in 2009 to $430Mbf. Poplar’s average price then decreased during the 4th quarter of 2010 to $396Mbf. Current pricing though shows that Poplar prices have rose to $407Mbf.
Ash is one species that has consistently been on the rise since 2007. Currently it is one of the hottest species in the market but profitability is difficult for the mills. Ash pricing for the 4th quarter of 2007 was $460Mbf. Prices continued to rise in 2008 to $492Mbf. The pricing in 2009 was off (as was most all other species pricing) and the price dropped to $456Mbf. During 2010 Ash prices were up to $550Mbf and currently the price is $573Mbf, a 25% increase from 2007 prices.
From the pricing information above, it does appear the hardwood markets are recovering…slowly but surely. If the housing market continues its growth and recovery, look for the hardwood markets to follow suit. As with most any market………time will tell.
Below are some comments about other market segments:
- · Flooring companies are slowing lumber purchases and putting some sawmills on quotas
- · Low grade markets (pallet cants and railroad ties) are currently strong and are actually helping the grade lumber markets by pushing more sawlog production into cants and ties rather than grade lumber.
Jeff Settle is a Forest Resource Information Specialist with the Indiana DNR Division of Forestry.